The Pareto principle and 20-60-20 rule both provide guidelines that a sales manager can use when wondering how to improve sales figures for their company.
Successful sales managers may need to experiment with multiple sales management techniques and theories or even use a blend of different techniques to achieve success. It is this ability to adapt that will ultimately lead to successful sales performance management. Both the Pareto and the 20-60-20 principle are similar and work together to reveal some commonly observed occurrences in sales management.
What is the 80-20 rule of sales management?
The 80-20 rule, is a sales rule that states that 80 percent of yield will originate from 20 percent of the sources. The principle is based on an on observation made in a garden that 20 percent of the plants were actually yielding 80 percent of the crops. In business, it can be simplified to state that the majority of revenue will be coming from a small subset of clients and a small subset of all staff members. It is not meant to be taken literally, but as a reminder that the bulk of all business will be provided by these individual assets and a guide when wondering how to improve sales. In practice, the 80/20 principle can be used as a guide regarding training, employee effort and marketing.
How to improve sales using the Pareto principle.
How to improve sales using the 80/20 rule is fairly simple. 20 percent of a company’s product line is likely to lead to 80 percent of the company’s sales. Likewise, 20 percent of the company’s sales staff members would be expected to make 80 percent of the company’s sales. When trying to improve business efficiency following the Pareto principle, all of these aspects need to be considered. Companies can improve their profits overall by trying to automate client interaction for the 80 percent of clients that purchase very little, retraining the 80 percent of staff members that don’t sell effectively and modifying the 80 percent of products that aren’t considered desirable.
What is the 20-60-20 rule of sales management?
The 20-60-20 rule of sales management theorizes that 20 percent of staff members will be very strong, 60 percent will be about average and 20 percent will be weak. The 20-60-20 rule is geared at improving sales efficiency through staff management and showing how to improve sales by revealing that the skill of staff members will fall on a bell curve. Ideally, however, a skilled sales manager will be able to defy these statistics. It is more apt to say that sales personnel will naturally fall between 20-60-20 but that proper sales performance management will be able to greatly improve these numbers.
How to improve sales using the 20-60-20 rule.
How to improve sales using the 20-60-20 rule is similar to the Pareto principle. Sales managers looking at how to improve sales through the 20-60-20 rule need to first identify the categories that each staff member falls in based on their overall productivity and sales. Once this is done, the sales managers need to focus on improving their average and weak performers performers and showing their strongest performers that they trust them. The majority of the sales manager’s attention should be focused on the 60 percent of average performers, as this is the group that most staff members will usually fall into.
How to improve sales overall.
When looking at how to improve sales overall, a company can use both rules. The 20-60-20 rule and the Pareto principle are both in agreement that 20 percent of staff members will be the most skilled and effective on any given team. Sales managers need to remember this if they hope to retain their most skilled and talented members. Additionally, sales managers should avoid the temptation to simply get rid of the least performing members of their team when struggling with how to improve sales. As both the Pareto principle and the 20-60-20 rule show, underachievers are normal within any industry. An investment in proper training and motivation may resolve the problem better than constant employee churn.
Pareto Priciple facts:
Pareto rule. 20% of the company’s sales staff make 80% of the company’s sales
Sales manager’s attention should be focused on the 60% of average performers
Image courtesy and Pareto / 80-20 Rule: http://www.pinterest.com/lisaboerum/pareto-principle-8020-rule/